“I’m kind of a big deal.”
– Ron Burgundy, Anchorman
This wondeful soliloquy enters my mind whenever I see an e-mail from a prospective buyer wishing to put an offer in on a sub-$100,000 home. “This will be a cash offer,” the e-mails say, with the expectation that cash moves you instantly into first class and/or the fast check-in line at The Mirage.
Except rarely are these buyers alone in their cash-flush state. In fact, cash is the norm in the sub-$100,000 portion of the Phoenix real estate market. So far this year, 10,410 single family detached homes listed at under $100,000 have sold in Maricopa County. According to the information entered by the listing agent (God help us all) 6,583 of these – a full 63.2 percent – have been sold in a cash transaction.
Drop that limbo bar to the $75,000 mark and 5,536 of the 7,147 closed sales – 77.5 percent of the sales – are cash deals. And the percentages continue to climb as prices fall and loans become impossible to find.
Why wouldn’t a bank accept your cash offer? There’s one obvious answer – you didn’t put enough cash in the wheelbarrow. The sub-$100k market is highly competitive and the successful buyers are the ones writing multiple offers to see what might stick.
There are rumblings from those looking in these price ranges that “those damn investors” are snapping everything up and running up prices like they did in 2005; what’s different this time around, of course, is some of these properties are at 1970s pricing. One client of mine who had been attempting a short sale was surprised to learn her home was worth about what she paid for it in the early 1970s.
Undervalued property? Absolutely. It can and is happening. At the same time, the investors are purchasing properties like this west Phoenix gem I wrote an offer for yesterday afternoon – no kitchen, no air conditioner (it has been on the roof, the previous owners apparently brought out a crane to remove it), no bathroom fixtures, even the fireplace has been removed.
What are you buying for $14,000, the cost of a smallish automobile? A shell of a home. Four walls, hopefully some wiring. The rest is up to the buyer to replace.
Which is why cash isn’t king. It’s a necessity. With the NBA Finals starting tonight this brings to mind the street basketball axiom “come strong or don’t come at all.” It’s great that you have cash. Really. But you’re far from the only one. So cash isn’t nearly enough to guarantee that first offer’s going to fly.
[tags]Phoenix real estate[/tags]